Finance Minister Pranab Mukherjee today said financial reforms in India would be adapted keeping in mind the local conditions. He said the banking system had come under a sharper focus after the global crisis, but the fact that India had not gone through any financial turbulence due to the financial deregulation was a testimony to the view that reforms in global standards had to be adapted to local conditions.
In pre-Budget meeting with financial sector representatives, Mukherjee said the cost of banking intermediaries in India was high and bank penetration was limited to only a few customer segments and geographies. He added the government was trying to address this in collaboration with the Reserve Bank of India, but much more was needed to be done.
Bankers suggested the government to restore the short-term crop loan subvention to 2 per cent. They also requested the minister to allow banks to float tax-free infrastructure bonds.
The meeting was attended by State Bank of India Chairman O P Bhatt, Punjab National Bank Chairman K R Kamath, UCO Bank Chairman Arun Kaul, National Housing Bank Chairman R V Verma, National Bank for Agriculture and Rural Development Chairman Rakesh Singh and Kotak Mahindra Group Executive Vice-Chairman & Managing Director Uday Kotak.
The finance minister emphasised that financial inclusion was a key factor of sustainable and inclusive growth. He said access to affordable financial services enlarges livelihood opportunities and empowers the poor to take charge of their lives.
“It is critical to connect the banked and the unbanked sectors and enable the unbanked to become vibrant and productive participants in the process of economic growth. The government has accorded high importance to financial inclusion to cover the entire gamut of financial services pertaining to savings, credit, insurance and transfers,” he added.
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As part of the financial sector reforms in India, Mukherjee said, an apex-level Financial Stability and Development Council had been set up to strengthen and institutionalise the mechanism for maintaining financial stability. Without prejudice to the autonomy of market regulators, this Council would undertake macro prudential supervision of the economy and address inter-regulatory co-ordination issues. It would also focus on financial literacy and financial inclusion, he added.
It has also been decided to set up a Financial Sector Legislative Reforms Commission to rewrite and clean up the financial sector laws and bring them in line with the requirements of the sector.